Oil falls 2% on Chinese demand concerns

Oil prices fell nearly 2% on Thursday as China stood by its zero-COVID policy and a rise in US interest rates pushed the dollar higher and raised fears of a global recession that would dampen fuel demand.

However, losses were limited by concerns over supply tightness. Brent futures fell $1.49, or 1.5%, to $94.67 a barrel, while US West Texas Intermediate (WTI) crude fell $1.83, or 2.0%, to $88.17. Both benchmarks had gained more than $1 on Wednesday, helped by another drop in US oil inventories, despite the Federal Reserve raising interest rates by 75 basis points and US central bank chief Jerome Powell saying it was premature to consider a pause in rate hikes. The dollar rallied on Thursday after Powell said US interest rates were likely to peak above current investor expectations. A strong dollar makes oil more expensive for buyers using other currencies, reducing demand for oil. "Oil is struggling with both a weakening global economic outlook and a rising dollar. It doesn't look like this bearish trend will ease anytime soon," said Edward Moya, senior market analyst at data and analytics firm OANDA. The number of Americans filing new applications for unemployment benefits unexpectedly fell last week, suggesting that the labor market remains strong despite slowing domestic demand amid the Fed's sharp rate hikes to contain inflation. The US is not the only country to tighten policy. The Bank of England raised interest rates by the most since 1989 but also warned that the UK faces a long recession. "Growing concern that growth is stalling will inevitably affect global oil demand and another downward revision in the next set of forecasts is not a far-fetched idea," PVM Oil analyst Tamas Varga said. Follow Global Economic Developments on Social Media! Click here to follow Ieconomy official Facebook account! Click here to follow Ieconomy official Instagram account! Click here to follow Ieconomy official Twitter account!